Latest news with #AbneeshRoy
Economic Times
04-08-2025
- Business
- Economic Times
FMCG margin recovery likely in Q2 and Q3; Britannia, HUL, Nestlé among top picks: Abneesh Roy
"Coming to your specific question on EBITDA margins—my sense is that for most companies, the worst is behind us. HUL, for example, has proactively reduced its margin as a strategic choice, aiming for growth, which has led to a slightly lower margin profile. However, from an outlook perspective, costs of coffee and tea are correcting, which should help their margins. Even in Q1, some commodities like detergent inputs were under control. Now PFAD, which is used in soaps, is also expected to correct, given that palm oil prices have come down," says Abneesh Roy, ED, Nuvama Institutional Equities. ADVERTISEMENT Do you expect margin expansion to be a consistent trend in Q2 and Q3 across the sector? Which companies are best positioned to lead this recovery, especially considering commodity cost deflation and evolving consumption patterns? Abneesh Roy: Yes, in most of the FMCG company results, we've seen that either India volume growth has exceeded expectations or met them. So clearly, in Q1, the early signs of an urban slowdown have now paused, and a gradual urban recovery is starting to emerge. Even in ITC's cigarette business, for example, cigarette volume growth has accelerated. On a two-year basis in Q1, it showed over 9% volume growth compared to about 7% in Q4. For HUL—being the sector's behemoth—volume growth was 4% versus 2% in the previous quarter. We're seeing a gradual recovery across most categories and companies in Q2 and beyond, except in summer-related categories. For instance, both Varun Beverages and Emami saw year-on-year volume declines in summer categories—Varun was down 7%. Even in Q2, despite a favourable base, the high monsoon impact on Varun Beverages will need to be monitored. Coming to your specific question on EBITDA margins—my sense is that for most companies, the worst is behind us. HUL, for example, has proactively reduced its margin as a strategic choice, aiming for growth, which has led to a slightly lower margin profile. However, from an outlook perspective, costs of coffee and tea are correcting, which should help their margins. Even in Q1, some commodities like detergent inputs were under control. Now PFAD, which is used in soaps, is also expected to correct, given that palm oil prices have come again, in HUL's case, there has been a conscious reduction in EBITDA margin—around 100 bps—to support growth. On the other hand, for companies like ITC, we expect margin improvement in Q2 and Q3. In Q1, ITC faced three challenges: higher tobacco costs (which have now corrected), a larger contribution from the education and stationery business where Chinese imports had an impact, and subdued FMCG margins. However, in Q2 and Q3, the share of the stationery business will decline seasonally, and cost deflation—especially in palm oil—will support margin expansion in the FMCG Nestlé faced high coffee costs in Q1, but coffee prices have since corrected by 30%. Tea companies also have a favourable outlook due to a good crop. Overall, for most companies, Q1 was the margin bottom—except for HUL, where it was a deliberate strategy. But frankly, I don't see much reason to worry about HUL. We remain positive—it should see improving volumes and overall sales. Even the parent company, Unilever, has made strong, positive comments regarding HUL. ADVERTISEMENT What about urban recovery? Managements have noted that green shoots are visible. Do you think this will translate into a more sustained recovery, and is the worst of the weak urban demand now behind us? Abneesh Roy: Yes, that's a good question. Urban consumption in FMCG, QSR, apparel, durables, and other consumption segments has been sluggish. But my sense is that we will see gradual green shoots in FMCG. Rural will still grow faster than urban in the next three quarters. However, from negative volume growth in urban FMCG over the past three to four quarters, we're now moving toward gradual growth across most categories and companies. ADVERTISEMENT Food inflation is under control, overall inflation is moderate, there have been interest rate cuts, and the government has offered higher tax rebates—all of which help FMCG demand. But in other discretionary consumption areas, challenges remain. For instance, the IT sector is witnessing job cuts—TCS let go of 12,000 people—and overall IT hiring is weak, which will impact retail and discretionary in urban FMCG, the issue was primarily at the lower end of the income pyramid. There, softer food inflation and rate cuts have helped. The retail and QSR challenges, by contrast, will likely affect the mid-to-top-end of consumption. Still, for FMCG, urban green shoots are emerging. Even in paints, we are positive—Asian Paints, for instance, is expected to benefit. ADVERTISEMENT What's your view on pricing power across FMCG going forward? Do companies still have room to raise prices, or is that cycle behind us, given the competition and subdued demand? Abneesh Roy: In fact, we take the opposite view. There are three important things here. Historically, FMCG companies have taken 2–3% price hikes annually. But currently, there's no need. Most raw material costs are coming down—coffee is down 30%, the tea crop looks good, and prices of palm oil and crude are under control. Nearly every key FMCG raw material is stable. With a good monsoon, agri-inputs and dairy costs should also remain benign. So, I don't see any reason for the usual 2–3% price hike, since there's no cost I said, the worst is behind us in urban markets, and a gradual recovery is on the cards—so macros are supportive. In terms of competition, India's FMCG sector has always been competitive. But even there, we think the worst is behind us, particularly with D2C brands. Many of them are focusing on profitability now. Larger listed companies like HUL, ITC, and Marico have acquired strong D2C brands—Minimalist, OZiva, etc. The remaining smaller, unlisted D2C players are shifting focus toward profit as well. ADVERTISEMENT So, D2C players won't disappear, but we expect less aggressive pricing and less disruption. Even Q-commerce and e-commerce platforms—if you look at category leaders—they now have strong partnerships with large FMCG companies. Quick commerce is also consolidating, reducing the number of dark stores. This is good news for large FMCG players. While staples and core FMCG seem to be recovering, what's your take on big-box retail? After a mixed set of results from DMart, what can we expect from Trent this week? Abneesh Roy: The outlook for Trent was already shared at the AGM, so to an extent, the Q1 sales numbers are priced in. There are two issues here. First, the base has been high over the past few years, so some catch-up is happening. Second, apparel, QSR, and retail are still being impacted by weak IT job growth and lower salary hikes—this segment is important for apparel and retail consumption. Third, there was a timing shift—some festivals impacted Q4 this year, not Q1. VMart mentioned this, and other companies have echoed it. As for Avenue Supermarts (DMart), their entry into Uttar Pradesh is a big positive. Historically, they've opened 40–50 stores per year, but now, with UP in the mix, store addition should accelerate. Over the next 3–5 years, DMart's expansion will likely get a strong boost. Their CEO Neville has highlighted this as a key strategic focus. While competition from quick commerce remains, the store expansion story is intact and will be a tailwind. UP is India's largest state, and entry into Agra is a strong signal of things to come. Lastly, help us understand your pecking order in the FMCG and consumption space. Which stocks do you prefer for the next 6–12 months? Abneesh Roy: We are more positive on FMCG and paints. In FMCG, we like Britannia—results are expected this week, and we expect strong numbers in FY26 in terms of volume, sales, and margins. We also like Hindustan Unilever—we've seen strong commentary from both the company and its parent. Nestlé is another pick; coffee costs are down 30%, so from next quarter, we should see margin recovery. In paints, we like Asian Paints—competition has stabilised and urban demand is picking up slightly. We also like Bikaji. Overall, FMCG should do well. We're also seeing investor rotation from sectors facing headwinds, like IT, into FMCG. Demand and margin outlooks both look favourable in FY26.
Time of India
04-08-2025
- Business
- Time of India
FMCG margin recovery likely in Q2 and Q3; Britannia, HUL, Nestlé among top picks: Abneesh Roy
Live Events (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel "Coming to your specific question on EBITDA margins—my sense is that for most companies , the worst is behind us. HUL, for example, has proactively reduced its margin as a strategic choice, aiming for growth, which has led to a slightly lower margin profile. However, from an outlook perspective, costs of coffee and tea are correcting, which should help their margins. Even in Q1, some commodities like detergent inputs were under control. Now PFAD, which is used in soaps, is also expected to correct, given that palm oil prices have come down," says Abneesh Roy, ED, Nuvama Institutional in most of the FMCG company results, we've seen that either India volume growth has exceeded expectations or met them. So clearly, in Q1, the early signs of an urban slowdown have now paused, and a gradual urban recovery is starting to emerge. Even in ITC's cigarette business , for example, cigarette volume growth has accelerated. On a two-year basis in Q1, it showed over 9% volume growth compared to about 7% in HUL—being the sector's behemoth—volume growth was 4% versus 2% in the previous quarter. We're seeing a gradual recovery across most categories and companies in Q2 and beyond, except in summer-related categories. For instance, both Varun Beverages and Emami saw year-on-year volume declines in summer categories—Varun was down 7%. Even in Q2, despite a favourable base, the high monsoon impact on Varun Beverages will need to be to your specific question on EBITDA margins—my sense is that for most companies, the worst is behind us. HUL, for example, has proactively reduced its margin as a strategic choice, aiming for growth, which has led to a slightly lower margin profile. However, from an outlook perspective, costs of coffee and tea are correcting, which should help their margins. Even in Q1, some commodities like detergent inputs were under control. Now PFAD, which is used in soaps, is also expected to correct, given that palm oil prices have come again, in HUL's case, there has been a conscious reduction in EBITDA margin—around 100 bps—to support growth. On the other hand, for companies like ITC, we expect margin improvement in Q2 and Q3. In Q1, ITC faced three challenges: higher tobacco costs (which have now corrected), a larger contribution from the education and stationery business where Chinese imports had an impact, and subdued FMCG margins. However, in Q2 and Q3, the share of the stationery business will decline seasonally, and cost deflation—especially in palm oil—will support margin expansion in the FMCG Nestlé faced high coffee costs in Q1, but coffee prices have since corrected by 30%. Tea companies also have a favourable outlook due to a good crop. Overall, for most companies, Q1 was the margin bottom—except for HUL, where it was a deliberate strategy. But frankly, I don't see much reason to worry about HUL. We remain positive—it should see improving volumes and overall sales. Even the parent company, Unilever, has made strong, positive comments regarding that's a good question. Urban consumption in FMCG, QSR, apparel, durables, and other consumption segments has been sluggish. But my sense is that we will see gradual green shoots in FMCG. Rural will still grow faster than urban in the next three quarters. However, from negative volume growth in urban FMCG over the past three to four quarters, we're now moving toward gradual growth across most categories and inflation is under control, overall inflation is moderate, there have been interest rate cuts, and the government has offered higher tax rebates—all of which help FMCG demand. But in other discretionary consumption areas, challenges remain. For instance, the IT sector is witnessing job cuts—TCS let go of 12,000 people—and overall IT hiring is weak, which will impact retail and discretionary in urban FMCG, the issue was primarily at the lower end of the income pyramid. There, softer food inflation and rate cuts have helped. The retail and QSR challenges, by contrast, will likely affect the mid-to-top-end of consumption. Still, for FMCG, urban green shoots are emerging. Even in paints, we are positive—Asian Paints, for instance, is expected to fact, we take the opposite view. There are three important things here. Historically, FMCG companies have taken 2–3% price hikes annually. But currently, there's no need. Most raw material costs are coming down—coffee is down 30%, the tea crop looks good, and prices of palm oil and crude are under control. Nearly every key FMCG raw material is stable. With a good monsoon, agri-inputs and dairy costs should also remain benign. So, I don't see any reason for the usual 2–3% price hike, since there's no cost I said, the worst is behind us in urban markets, and a gradual recovery is on the cards—so macros are supportive. In terms of competition, India's FMCG sector has always been competitive. But even there, we think the worst is behind us, particularly with D2C brands. Many of them are focusing on profitability now. Larger listed companies like HUL, ITC, and Marico have acquired strong D2C brands—Minimalist, OZiva, etc. The remaining smaller, unlisted D2C players are shifting focus toward profit as D2C players won't disappear, but we expect less aggressive pricing and less disruption. Even Q-commerce and e-commerce platforms—if you look at category leaders—they now have strong partnerships with large FMCG companies. Quick commerce is also consolidating, reducing the number of dark stores. This is good news for large FMCG outlook for Trent was already shared at the AGM, so to an extent, the Q1 sales numbers are priced in. There are two issues here. First, the base has been high over the past few years, so some catch-up is happening. Second, apparel, QSR, and retail are still being impacted by weak IT job growth and lower salary hikes—this segment is important for apparel and retail there was a timing shift—some festivals impacted Q4 this year, not Q1. VMart mentioned this, and other companies have echoed it. As for Avenue Supermarts (DMart), their entry into Uttar Pradesh is a big positive. Historically, they've opened 40–50 stores per year, but now, with UP in the mix, store addition should accelerate. Over the next 3–5 years, DMart's expansion will likely get a strong boost. Their CEO Neville has highlighted this as a key strategic focus. While competition from quick commerce remains, the store expansion story is intact and will be a tailwind. UP is India's largest state, and entry into Agra is a strong signal of things to are more positive on FMCG and paints. In FMCG, we like Britannia—results are expected this week, and we expect strong numbers in FY26 in terms of volume, sales, and margins. We also like Hindustan Unilever—we've seen strong commentary from both the company and its parent. Nestlé is another pick; coffee costs are down 30%, so from next quarter, we should see margin paints, we like Asian Paints—competition has stabilised and urban demand is picking up slightly. We also like Bikaji. Overall, FMCG should do well. We're also seeing investor rotation from sectors facing headwinds, like IT, into FMCG. Demand and margin outlooks both look favourable in FY26.
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Business Standard
07-07-2025
- Business
- Business Standard
Sales growth, lower raw material costs to help Godrej Consumer stock
The stock of consumer major Godrej Consumer Products (GCPL) rose by over 6 per cent and was the highest gainer in both the Nifty FMCG and BSE100 indices. This surge in stock prices is in response to the strong June quarter (Q1FY26) performance of the company. The company posted double-digit consolidated revenue growth, which comfortably beat the Street's estimates of mid-single-digit growth. The stock has gained about 26 per cent since the start of March, outperforming the Nifty FMCG return, which has been in the single digits during the same period. Aided by high single-digit volume growth, GCPL is expected to post double-digit growth on a consolidated basis. This overall growth is expected to be driven by a robust performance in the India home care business, especially the household insecticides (HI) segment and the Africa geography. In addition to HI, home care includes air care and detergents, accounting for 45 per cent of India's sales and 27 per cent of the consolidated business. Commenting on the performance of GCPL and other FMCG majors, analysts led by Abneesh Roy of Nuvama Research pointed out that companie.s, except those with large summer categories, are surprising positively, indicating that the worst of the slowdown is behind and a gradual recovery is ahead. For GCPL, the HI segment in India exceeded expectations, with mid-to-high single-digit growth, driven by incense sticks, new electrical formulations, a strong June recovery from new ad campaigns, and favourable weather. Household insecticides had delivered strong double-digit volume growth in Q4FY25, boosted by a favourable season and effective premiumisation. Goodknight Agarbatti emerged as the market leader, while premium formats, like liquid vapourisers with the new molecule RNF, continued to capture market share, reflecting consumer acceptance and the success of premiumisation efforts. While home care performed well, personal care (51 per cent of India sales) is expected to grow in the low-single digits during the quarter, affected by the soaps segment, which saw price-volume rebalancing due to commodity volatility. A steep rise in palm oil inflation and price adjustments led to volume decline in the March quarter and compressed margins. Standalone (India business) operating profit margins are likely to be below the normative range (24 per cent–26 per cent) due to higher input costs, advertising and promotional spend, and delayed pricing action in soaps. Given these pressures, analysts led by Mehul Desai of JM Financial Research expect margin compression of 270 basis points Y-o-Y. With palm oil prices moderating at the end of June, the company expects the gains to flow through to the operating level in the second half of FY26. In the international business, Indonesia, which accounts for 14 per cent of consolidated sales, is expected to see flat volume growth due to rising competitive pressures. The other parts of the global business, which are grouped under Godrej Africa, USA, and the Middle East, are expected to maintain their growth momentum, delivering double-digit value and volume growth, alongside robust margins. The company has maintained its guidance of high-single-digit consolidated revenue growth, driven by mid-to-high-single-digit volumes for the standalone business in FY26. The pre-quarter update and the strong near-term outlook are expected to support the stock.
Mint
22-05-2025
- Business
- Mint
ITC expects consumption uptick on rains, rate cuts
ITC Ltd on Thursday predicted India's consumption engines to keep firing as inflation cools, interest rates fall, and rain clouds gather, following a similar prognosis by industry leader Hindustan Unilever Ltd. Consumption spending is expected to rise steadily as a good monsoon powers a continued rural recovery, the maker of Bingo chips and Gold Flake cigarettes said; alongside, lower inflation and the recent income tax cut are expected to boost disposable incomes in towns and cities. The company expects India's macro-economic variables to remain stable in the year ahead. "The cumulative impact of pick-up in government capex in the second half of FY25 and front-loading of capex outlay in FY26, along with interest rate cuts and liquidity support from RBI, would also be supportive of growth," ITC said in a filing. Also read: Myntra steps out of India to sell clothes in Singapore India's second-largest consumer goods maker reported a 289% jump in March quarter profit, thanks to an exceptional gain from the demerger of its hotels business. Profit touched ₹19,561.57 crore, up from ₹5,020 crore a year earlier. Excluding profit from exceptional items, profit stood at ₹4,875 crore, up 0.77%. ITC's hotels demerger took effect on 1 January this year. A Bloomberg survey of 22 analysts had estimated ITC to report standalone March revenue of ₹16,979 crore, while 18 analysts estimated a net profit of ₹4,942 crore. 'Adjusted profit after tax came in line with our but 2.5% below consensus estimates," Abneesh Roy, executive director, Nuvama Institutional Equities. Roy said revenue and Ebitda were largely in line with Nuvama's estimates. Ebitda is short for earnings before interest, tax, depreciation, depreciation and amortization. Standalone revenue from operations in the fourth quarter grew 9.4% to ₹18,494.06 crore, up from ₹16,907.18 crore in the same quarter of FY24. Expenses grew 12.7% to ₹12,872.66 crore. On 25 April, HUL had said that this is 'a good moment" for the consumer packaged goods industry, as India's macros turn favourable. 'Monsoons have been good, projections have been decent, reservoirs are full, and agri output is strong," chief executive officer and managing director Rohit Jawa said at a post-earnings meet. Also read: Shopping online? Your favourite brands may be saving their best for you For the full year FY25, ITC recorded overall profit after tax (including profit from discontinued operations)of ₹35,196 crore, up 72.3% year-on-year. Standalone revenue from operations grew 10.31% to ₹74,236.07 crore. Earnings per share for the year stood at ₹16.07, against the previous year's ₹15.98. The ITC board recommended a dividend of ₹7.85 per share for FY25. Together with the interim dividend of ₹6.50 paid on 7March, the total dividend for the year totals to ₹14.35 per share. During the quarter, ITC's FMCG business reported a 3.6% increase in revenue to ₹5,494.63 crore, while profit decreased 28%. ITC reported severe price pressures in edible oil, wheat, maida, potato, cocoa and packaging inputs—especially in the second half of the year. These pressures were partially mitigated through focused cost management, portfolio premiumization, supply chain agility, digital interventions and calibrated pricing actions, ITC said. ITC said atta, spices, snacks, frozen snacks, dairy, premium personal sash, homecare and agarbatti business led growth during the quarter. It also reported heightened competitive intensity in certain categories such as noodles, snacks, biscuits and popular soaps. Also read: Marico calls it—India's FMCG sector to rebound this financial year ITC's 'Classmate' notebook business faced stiff competition from smaller brands, which cashed in on the drop in paper prices. 'The FMCG segment delivered a resilient performance amidst weak demand conditions and significant increase in competitive intensity from regional-local players. Costs of several major inputs such as edible oil, wheat, maida, potato and cocoa witnessed sharp escalation, especially in the second half of the financial year, weighing on margins…The business sustained competitive levels of trade and marketing investments during the year towards supporting growth and market standing," the company said. Last month, rival HUL reported a 2% increase in revenue and volumes in the March quarter. Its management pointed to stressed demand in urban markets on account of high inflation that outpaced wage growth, leading consumers to prioritize essentials over discretionary items. ITC, which sells Sunfeast cookies and Aashirvaadstaples, introduced over100 new FMCG products during the year. Its cigarettes business reported a 6% jump in quarterly revenues as volumes rose. 'Cigarette volumes increased 5% year-on-year, slightly ahead of our estimate of 4%," said Nuvama's Roy. Sharp cost escalation in leaf tobacco partly mitigated through improved mix and focused cost management initiatives, during the quarter. In the fourth quarter, segment revenuefor its agriculture business was up18% year-on-year to ₹3,649.16 crore. The paperboards, paper and packaging segment remains impacted due to low-priced Chinese and Indonesian supplies in global markets including India, soft domestic demand conditions and unprecedented surge in wood prices, the company segment reported revenue growth of 5.5% to ₹2,187.62 crore. Rising domestic wood prices and lower selling prices are squeezing margins. ITC is addressing this through plantation initiatives, product optimization and cost control. 'Representations continue to be made at appropriate forums for suitable measures to safeguard domestic industry," ITC said. The company will continue to monitor urban demand recovery, inflation trajectory and private capex going continues to remain concerned about the impact of reciprocal trade tariffs and geopolitical disruptions.
Time of India
09-05-2025
- Business
- Time of India
Firmly committed to prioritise national interest over all other considerations: JioStar
JioStar affirmed its commitment to national interest following the IPL's suspension due to escalating military tensions between India and Pakistan. The company pledged support to the government and armed forces, expressing intentions to collaborate with the BCCI to reschedule the tournament when appropriate. Industry experts anticipate minimal financial impact, emphasizing national unity and security as paramount. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads With the IPL suspended, its broadcast and streaming rights holder JioStar on Friday said the company stands firmly committed to prioritise national interest over all other considerations, while extending support to the government and armed forces. The company said it will work with the BCCI to bring back IPL, which has been suspended for a week because of the deepening military confrontation between India and Pakistan, at an appropriate time."We, at JioStar, wholeheartedly support the BCCI's decision to suspend TATA IPL 2025 and stand firmly committed to prioritise national interest over all other considerations."At this time, we must stand united with our country, support the government and our armed forces, and extend solidarity and support to the civilians affected," the company said in a further said, "We will work with the BCCI to bring back the tournament at an appropriate time."JioStar will work closely with all stakeholders to ensure the transition is managed in a seamless manner and everyone involved in the tournament broadcast returns home safely, it the decision to suspend IPL, Rediffusion Chairman Sandeep Goyal said, "national interest comes first" and it is both "about security and semantics"."While our soldiers are fighting the enemy on the battlefield, risking their lives, you can't have a stadium full chanting for sixes. The nation's mood is sombre and serious - and it is right everyone closes ranks," he however, said, "The broadcaster will surely have a force majeure clause - insurance will cover any brands, news channels will become the natural choice (to advertise) but for most it will be mostly wait-and-watch."Nuvama Institutional Equity Executive Director Abneesh Roy said as most of the IPL is over and only a small number of matches is left, "we don't see this as significant impact, more of sentimentally negative" on stocks of SUN TV and United Spirits, which have IPL teams Sunrisers Hyderabad and Royal Challengers Bangalore Indian Premier League (IPL) was on Friday suspended because of the deepening military confrontation between India and Pakistan with the BCCI saying that national interest trumps other considerations at a time when the country is responding to a terror attack and unwarranted aggression from across the border.A cloud of uncertainty had loomed over the future of the ongoing edition since the cancellation of Thursday's match between Punjab Kings and Delhi Capitals in Dharamsala midway following air raid alerts in neighbouring cities of Jammu and Pathankot.
